By: Tomas Ronolski - AllPennyStocks.com News

Wednesday, May 15, 2013

Penson Worldwide Inc., a one-time major in handling security trades in the United States was struggling for years to make ends meet before finally succumbing to financial pressures and filing for Chapter 11 bankruptcy protection along with nine of its affiliates in January 2013. For anyone in the market that used a brokerage firm that used Dallas, Texas-based Penson to buy and sell shares prior to the bankruptcy, the pain could be felt as well with federal regulations on protective reserve capital squashing the company’s ability to close positions on many illiquid stocks. In short, the company put restrictions on the amount of shares that could be sold in given trading periods based on average trading volume levels for the company, often times making it impossible to ever sell a share of companies that were held in a portfolio. By the way, Penson is not gone from the markets as it is in the process of liquidation. It trades on the Pink Sheets under the ticker “PNSNQ” with a closing price on Tuesday of $0.006.

The company going under had a ripple effect across many traders, but also damaged the operations of QuoteMedia, Inc. (OTCQB:QMCI), the provider of market data and cloud-based applications that are used on financial websites across the web. Chances are that many of the readers of this article have visited financial portals that employ QuoteMedia data. We use their comprehensive quotation systems right here at AllPennyStocks.com to provide our members with a robust platform of due diligence data and stock quotations.

Penson was one of QuoteMedia’s larger clients. The company reported its first-quarter financial results after Tuesday’s closing bell, which showed an impact of a small company losing a larger customer.

Revenue for the quarter declined by 7 percent to $2.38 million as compared to $2.56 million in the year prior quarter. Net loss for the quarter was $291,809, versus $104,987 in the first quarter of 2012.

"The loss of revenue from the Penson Worldwide Inc. contract and its affiliate companies negatively impacted our revenue for the first quarter of 2013. This loss of revenue will continue to impact our results in our next quarter, as well,” said Keith Guelpa, President of QuoteMedia.

Guelpa added, "We expect a return to healthy revenue growth in the 3rd and 4th quarters based on new product deployments that have been recently completed or are near completion, and on several new opportunities that are emerging for us in the marketplace.”

Guelpa was referring to the cessation of operations at AlphaTrade, a rival data provider that filed for Chapter 11 in March. According to QuoteMedia’s 10-Q filing with the SEC, “As part of AlphaTrade’s liquidation proceedings, TMX Group (TSX:X) has acquired AlphaTrade's customer list and, in cooperation with QuoteMedia, has approached AlphaTrade clients with the opportunity to replace AlphaTrade services with data services provided through TMX Group.”

QuoteMedia is experiencing a “significant migration” of former AlphaTrade customers as a result, which bodes well for supplementing (or exceeding) the revenue from Penson in a more profitable, less “eggs in one basket” growth model.

The drop in revenue should not overshadow the fact that QuoteMedia was profitable in 2012. In March, the company reported a 10 percent increase in year-over-year revenue, from $8.96 million in 2011 to $9.87 million in 2012. The company posted an operating profit in 2012 of $166,652, compared to an operating loss in 2011 of $219,891, an improvement of $386,543.

With a market capitalization of $3.66 million, the company is still trading at a more than fair price-to-earnings ratio, but growth in this fiscal year is again likely despite the slow start. Proper due diligence is, as always, encouraged.

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